Compliance News | December 9, 2021

Guidance on ACA Reporting for 2021

On December 6, 2021, the Treasury Department and the IRS published a Notice of Proposed Rulemaking (NPRM) addressing information reporting required under the ACA for 2021 and future years.

Relieved Businessman

The NPRM would:

  1. Permanently extend the deadline for distributing Forms 1095-B and 1095-C to employees and plan participants from January 31, 2022 to March 2, 2022
  2. Continue the enforcement policy that waives penalties for failing to distribute Forms 1095-B to participants if certain conditions (described below) are met
  3. Permit the IRS to impose penalties for incorrect or incomplete information even when employers and other plan sponsors act in good faith and distribute and file the required forms on time

Although the NPRM is proposed to apply for calendar years beginning after December 31, 2021 and will not be effective until the Treasury Department finalizes the rule, employers and plan sponsors may rely on the proposed regulation for reporting in 2021 and future years until the regulation is finalized.

Written or electronic comments and requests for a public hearing must be filed by February 4, 2022.

Background

The ACA created new reporting requirements related to enforcement of the individual shared responsibility penalty, the employer shared responsibility penalty and the premium assistance tax credits (available to certain individuals when purchasing coverage through the federal Marketplace/state Exchanges).

Congress reduced the ACA’s individual shared responsible penalty to zero effective January 1, 2019. Nonetheless, since Congress did not change the reporting rules, reporting entities are still required to comply with the reporting laws.

ACA Reporting Requirments

Reporting Entity Participant Reporting IRS Filing
Large employers Forms 1095-C to
full-time employees
Forms 1095-C filed with Form 1094-C, the transmittal form
Large employers with
self-insured plans that cover part-time employees, retirees, COBRA enrollees
Forms 1095-C or Forms 1095-B Forms 1095-C or Forms 1095-B filed with Form 1094-C or Form 1094-B, the corresponding transmittal form
Other sponsors of
self-insured plans
Forms 1095-B Forms 1095-B filed with Form 1094-B, the transmittal form

 

Deadlines modified

The NPRM, which was published in the December 6, 2021 Federal Register, would permanently grant employers and plans an extra 30 days to furnish forms to participants. This means the January 31 deadline would be permanently moved to March 2.

This relief does not affect the requirement to file these forms with the IRS by the required deadline, which means that reporting entities will still need to complete and file all required forms. The deadline for filing these forms is February 28, 2022 (if filing on paper) or March 31, 2022 (if filing electronically, which is required when filing 250 or more forms of either type).

1095-B enforcement relief continues

The NPRM proposes that the IRS will not impose a penalty if a plan fails to distribute Form 1095-B to plan participants when the plan meets the following two conditions:

  1. Posts a notice prominently on its website stating that individuals may receive a copy of their 1095-B upon request. This notice must provide an email address and physical address to which a request may be sent, as well as a telephone number to use for asking questions
  2. Provides Form 1095-B to any responsible individual within 30 days of the date the request is received

This is an extension of the enforcement policy announced last year, which we discussed in an October 2020 insight.

The relief only applies to the Form 1095-B, not to the requirement to provide full-time employees with Form 1095-C. Large employers must still distribute the Form 1095-C to full time employees. However, if a large employer uses Form 1095-C to report coverage of an individual who is not a full-time employee (e.g., full-year retirees or part-time employees), the enforcement relief would apply.

Good faith relief eliminated

The NPRM would allow the IRS to impose penalties on employers and plans who timely file all forms but make an error in the reporting. This could impose significant financial penalties on employers and plans trying to comply with the law in good faith who inadvertently have a reporting error. The NPRM states that good faith relief is no longer appropriate after 2020 filings because it was intended to be transitional. Reporting entities will now have to demonstrate reasonable cause for failing to timely or accurately complete reporting requirements.

Implications for employers and other plan sponsors

Employers and other plan sponsors should do the following:

  • Contact any third-party vendor that handles distribution of these forms to clarify roles and responsibilities for the 2021 reporting year.
  • Review contracts with third-party vendors in light of the potential for penalties for good faith reporting errors.
  • Watch for release of the final forms and instructions for 2021.

After the federal individual mandate penalty was reduced to zero, several states (e.g., California, New Jersey and Rhode Island) and the District of Columbia enacted their own individual mandate laws and requiring the sending and filing of the federal forms to meet state requirements. Reporting entities that are interested in taking advantage of the extended deadline (March 2, 2022) for providing Forms 1095-C and 1095-B should consider whether they must meet earlier delivery deadlines in order to comply with applicable requirements of jurisdictions.

Plan sponsors that distribute a Form 1095-B should decide whether they wish to provide paper copies of the form or, instead, post a notice on the plan’s website stating that individuals may receive a copy upon request.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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